First of all the name of the game is to have the corporation pay for as much as it possibly can so you are using pre-tax dollars. That means just what it sounds like, you are using money that you haven’t paid tax on yet. The corporation takes in income then gets to deduct all business related expenses and pays tax only on what’s left over, net taxable income.
C Corporation
If you have a C corporation, then the corporation will pay the tax on the net income. If you can leave some of the money in the corporation (as opposed to taking it out in the form of wages to you) this will save taxes because the corporation pays only 15 % federal tax on the first $ 50,000 of taxable income.
If the corporation makes $ 93,300 and if you can leave $ 50,000 in the corporation you will pay 15 % tax on all of the income, that is, the combined tax between you and the corporation. Here’s how:
Corporation net income $ 93,300
Less: wages to you ( 43,300)
Net taxable income to corporation $ 50,000 taxed at 15 %
Wages to you $ 43,300
Less: standard deduction
& personal exemption ( 9,350)
Taxable income to you $ 33,950 taxed at 15 %
So you’ve paid 15 % tax on $ 93,300 of income!
Remember, if you or you and your spouse are the sole owner/employees of the corporation it doesn’t matter who is paying the taxes you or the corporation. It’s all coming out of your pocket. For example, when you pay yourself wages the corporation will pay the FICA Social Security and Medicare taxes by withholding 50 % from wages and paying 50 % itself. It’s still all coming out of your pocket because you own the corporation.
S Corporation
If you have an S corporation, then the net taxable income and certain other items, like interest income and capital gains, will be passed through to you to be reported on your individual tax returns. If you can leave some of the money in the corporation (as opposed to taking it out in the form of wages to you) this will save taxes because the net income from an S corporation is not subject to self employment tax.
This is the great advantage to using an S corporation instead of a sole proprietorship that reports its income on your 1040 Schedule C. All of the income on the Schedule C is subject to self employment tax. It’s a killer!
Now keep in mind, you are an employee of the corporation and you must pay yourself a “reasonable” wage for the services you perform for the corporation. This means it can’t be too high or too low. If you are the sole owner/employee then no wage is too high because all of the income was generated by your efforts. Under the same theory, if you don’t pay yourself all of the income in the form of wages, the IRS may say you didn’t pay enough.
If you do not take all of the income out in the form of wages you should be careful about taking other distributions. Although you are allowed to take distributions from an S corporation without paying tax on them, the IRS could recharacterize the distributions as wages and charge you payroll taxes on them.
These are just a few areas where you can save money by using a corporation. If you have any questions about your tax strategy call Law Offices of Patricia Rowe at 925-256-1000.
Monday, September 14, 2009
Monday, September 7, 2009
7 Tips To Reduce Corporate Taxes (Way After Year End)
The final extended due date for the 2008 corporate tax returns for calendar year corporations is September 15th. You finally looked at your profit and loss statement and it shows too much net taxable income. Your CPA says you’re going to owe a lot of tax, but you don’t know how you’re going to pay for it because your corporation doesn’t have any cash. You don’t know how the corporation could have ended up with net income because there’s no money in the bank.
What can you do now to reduce your corporation’s taxes now that you’re finally doing the returns?
1. Review Your Cash Expenditures- Go through your receipts (if you don’t have any- here’s the reason why you must save every receipt for anything spent during the year- start now!) pick out the ones for which you paid cash. Add the business-related expenses to the corporate books as “loan from shareholder.” That is debit expense, credit loan from shareholder.
2. Look Through Your Personal Checkbook- Look through your personal checkbook for any business-related expenses. Even if you don't have a receipt- you have a cancelled check or entry on your bank statement. (If you don't receive bank statements in the mail make sure you print out statements from online banking and keep them in your file for each month.) Add the business expenses you paid for the corporation to the corporate books as "loan from shareholder." That is, debit expense, credit loan from shareholder.
3. Review Your Credit Card Charges- Go through your credit card bills for your personal credit cards. (You should have a corporate credit card, but those expenses should already be recorded on the books.) Pick out any business-related expenditures and record them on the corporate books. Again, record as “loan from shareholder.” That is debit expense, credit loan from shareholder.
4. Think of Furniture or Equipment You Use in Your Business- Depreciation! Depreciation! Depreciation! Think of furniture or equipment you use for your business that is not recorded on the corporate books. If you have an office at home you have a desk, chair, computer, printer and maybe other equipment there that has never been recorded on the books. You have cell phones, iphones, cameras, camcorders, bookcases, shelving, storage boxes, file cabinets, etc. If anything can be remotely related to your business put it on the corporate books and depreciate it. It must be recorded at lower of cost or fair market value at the date you placed it in service, which is probably January 1.
5. Pay Yourself Rent for Storage or Office Space- You may be using parts of your house or garage for office or storage space for your business. You can have the corporation pay you the fair rental value of that space per month. Think what you would charge an unrelated party to rent such space. Even though you are way past the end of the corporate year, look to see if you have any outstanding loans you owe the corporation. An amount for rent can be transferred on the books from loan receivable shareholder to rent expense. Remember- you should have a written lease agreement between you and the corporation. In the current year start paying yourself monthly by writing checks from the corporation to you.
6. Pay Yourself A Year End Bonus- Again, you are way past the corporation's year end. But if you are desperate you can do this, although it's risky. If you have an outstanding loan receivable from shareholder you can pay yourself a year end bonus by recording an adjustment from loan receivable shareholder to officer salaries. The problem is you'll have to file amended payroll tax returns and this could cause you to be audited by federal or state taxing authorities. It's best if you have amounts that were paid to you by the corporation at the end of the year. You will still have to pay interest and penalties on the payroll taxes, but this may be worth it if you owe alot of corporate tax.
7. Pay Your Spouse for Outside Services- If you can say your spouse or children performed any kind of services for the corporation, such as, bookkeeping, telephone calls, sales meetings, interior decorating service, filing, modeling for advertisements or brochures, etc. pay him or her as an independent contractor. Again you'll have to have an outstanding loan receivable from shareholder balance. But this will avoid having to amend payroll tax returns. Again make the adjustment from the loan receivable shareholder account to the expense account.
If you are not sure how to do any of these adjustments yourself you can just list the items and give them to your CPA to make the adjustments. If your CPA doesn't know how or doesn't want to do these adjustments, or if you don't have a CPA- call Law Offices of Patricia Rowe at 925-256-1000. We can help! See our website at PatriciaRowe.com.
The final extended due date for the 2008 corporate tax returns for calendar year corporations is September 15th. You finally looked at your profit and loss statement and it shows too much net taxable income. Your CPA says you’re going to owe a lot of tax, but you don’t know how you’re going to pay for it because your corporation doesn’t have any cash. You don’t know how the corporation could have ended up with net income because there’s no money in the bank.
What can you do now to reduce your corporation’s taxes now that you’re finally doing the returns?
1. Review Your Cash Expenditures- Go through your receipts (if you don’t have any- here’s the reason why you must save every receipt for anything spent during the year- start now!) pick out the ones for which you paid cash. Add the business-related expenses to the corporate books as “loan from shareholder.” That is debit expense, credit loan from shareholder.
2. Look Through Your Personal Checkbook- Look through your personal checkbook for any business-related expenses. Even if you don't have a receipt- you have a cancelled check or entry on your bank statement. (If you don't receive bank statements in the mail make sure you print out statements from online banking and keep them in your file for each month.) Add the business expenses you paid for the corporation to the corporate books as "loan from shareholder." That is, debit expense, credit loan from shareholder.
3. Review Your Credit Card Charges- Go through your credit card bills for your personal credit cards. (You should have a corporate credit card, but those expenses should already be recorded on the books.) Pick out any business-related expenditures and record them on the corporate books. Again, record as “loan from shareholder.” That is debit expense, credit loan from shareholder.
4. Think of Furniture or Equipment You Use in Your Business- Depreciation! Depreciation! Depreciation! Think of furniture or equipment you use for your business that is not recorded on the corporate books. If you have an office at home you have a desk, chair, computer, printer and maybe other equipment there that has never been recorded on the books. You have cell phones, iphones, cameras, camcorders, bookcases, shelving, storage boxes, file cabinets, etc. If anything can be remotely related to your business put it on the corporate books and depreciate it. It must be recorded at lower of cost or fair market value at the date you placed it in service, which is probably January 1.
5. Pay Yourself Rent for Storage or Office Space- You may be using parts of your house or garage for office or storage space for your business. You can have the corporation pay you the fair rental value of that space per month. Think what you would charge an unrelated party to rent such space. Even though you are way past the end of the corporate year, look to see if you have any outstanding loans you owe the corporation. An amount for rent can be transferred on the books from loan receivable shareholder to rent expense. Remember- you should have a written lease agreement between you and the corporation. In the current year start paying yourself monthly by writing checks from the corporation to you.
6. Pay Yourself A Year End Bonus- Again, you are way past the corporation's year end. But if you are desperate you can do this, although it's risky. If you have an outstanding loan receivable from shareholder you can pay yourself a year end bonus by recording an adjustment from loan receivable shareholder to officer salaries. The problem is you'll have to file amended payroll tax returns and this could cause you to be audited by federal or state taxing authorities. It's best if you have amounts that were paid to you by the corporation at the end of the year. You will still have to pay interest and penalties on the payroll taxes, but this may be worth it if you owe alot of corporate tax.
7. Pay Your Spouse for Outside Services- If you can say your spouse or children performed any kind of services for the corporation, such as, bookkeeping, telephone calls, sales meetings, interior decorating service, filing, modeling for advertisements or brochures, etc. pay him or her as an independent contractor. Again you'll have to have an outstanding loan receivable from shareholder balance. But this will avoid having to amend payroll tax returns. Again make the adjustment from the loan receivable shareholder account to the expense account.
If you are not sure how to do any of these adjustments yourself you can just list the items and give them to your CPA to make the adjustments. If your CPA doesn't know how or doesn't want to do these adjustments, or if you don't have a CPA- call Law Offices of Patricia Rowe at 925-256-1000. We can help! See our website at PatriciaRowe.com.
Sunday, September 6, 2009
Estimated Tax Payments
Individuals:
There are two ways to pay your income taxes- through withholding, like on wages, or by making estimated tax payments. Estimated tax payments for individuals are due kind of quarterly on April 15th, June 15th, September 15th and January 15th of the following year.
If Your Income Is Less Than Last Year
The amount of estimated tax you are supposed to pay is 90 % of what you “estimate” you will owe for that year, say 2009. You compute how much you think you will owe, then divide by four and pay that amount. Just use your tax return software for last year and put in your numbers for this year. This is a good method to use if your income in 2009 is a lot less than that of 2008.
If Your Income Is the Same or Higher Than Last Year
But if your income is about the same or higher than last year you should use one of the “exceptions” to penalty for underpayment of estimated tax. That is, pay an amount equal to 100 % of prior year’s tax. (You can pay less but I don’t recommend it- it’s temporary and you never know what they’re going to do with the tax code.) Take the tax on your 2008 1040 line 61, divide by four and pay that each quarter. Then you’re covered- even if you owe $ 1 million on April 15, 2010 you won’t get a penalty. If your prior year’s tax was zero, then that’s all you have to pay for estimated- zero. But be careful, you’ll have to include form 2210 with your return to prove it.
Corporations:
The rules for estimated tax payments for corporations are a little bit different from those for individuals. For a calendar year corporation (one whose tax reporting year ends on December 31) the estimated tax payments are due on April 15th, June 15th, September 15th and December 15th of the current year.
So, use the same rules as above for individuals, i.e., estimate the corporation’s actual tax if income is less than prior year or pay an amount equal to 100 % of prior year’s tax if income is equal to or greater than the prior year.
Unfortunately the “exception” to penalty for underpayment of estimated tax that allows you to pay zero if prior year’s tax was zero is not available to corporations. Attach completed form 2220 to the corporate return to prove your exception.
Individuals:
There are two ways to pay your income taxes- through withholding, like on wages, or by making estimated tax payments. Estimated tax payments for individuals are due kind of quarterly on April 15th, June 15th, September 15th and January 15th of the following year.
If Your Income Is Less Than Last Year
The amount of estimated tax you are supposed to pay is 90 % of what you “estimate” you will owe for that year, say 2009. You compute how much you think you will owe, then divide by four and pay that amount. Just use your tax return software for last year and put in your numbers for this year. This is a good method to use if your income in 2009 is a lot less than that of 2008.
If Your Income Is the Same or Higher Than Last Year
But if your income is about the same or higher than last year you should use one of the “exceptions” to penalty for underpayment of estimated tax. That is, pay an amount equal to 100 % of prior year’s tax. (You can pay less but I don’t recommend it- it’s temporary and you never know what they’re going to do with the tax code.) Take the tax on your 2008 1040 line 61, divide by four and pay that each quarter. Then you’re covered- even if you owe $ 1 million on April 15, 2010 you won’t get a penalty. If your prior year’s tax was zero, then that’s all you have to pay for estimated- zero. But be careful, you’ll have to include form 2210 with your return to prove it.
Corporations:
The rules for estimated tax payments for corporations are a little bit different from those for individuals. For a calendar year corporation (one whose tax reporting year ends on December 31) the estimated tax payments are due on April 15th, June 15th, September 15th and December 15th of the current year.
So, use the same rules as above for individuals, i.e., estimate the corporation’s actual tax if income is less than prior year or pay an amount equal to 100 % of prior year’s tax if income is equal to or greater than the prior year.
Unfortunately the “exception” to penalty for underpayment of estimated tax that allows you to pay zero if prior year’s tax was zero is not available to corporations. Attach completed form 2220 to the corporate return to prove your exception.
Tuesday, September 1, 2009
7 Ways to Avoid Being Audited By the IRS
We’ve all talked to the next door neighbor who has his brother in law preparing his tax returns. He always gets all his withholding back because his brother in law comes up with very creative deductions, like his cat for a dependent, his kid’s private school tuition for child care credit and the cost of his built-in pool for medical expense.
Well, the truth is you can deduct whatever you want on your returns until you’re audited. Then you’re screwed!
Keep in mind, the federal statute of limitations is three years and states are three to four years. That means the IRS has three years to audit your return. They don’t even look at your return until two years after you’ve filed it. So, by the time they audit you, disallow your deductions, recalculate your tax and assess a deficiency it’s three years after you filed and you’ve got to pay interest and penalties in an amount almost as much as the additional tax.
It’s better to keep receipts and records and deduct only what you’ll be able to defend in an audit. Another bit of advice is watch how you report your income and deductions on your tax return:
1. It’s all in the presentation! Schedule C “Profit or Loss from Trade or Business” is the area that usually gets people audited. The IRS is looking at deductions. Give as much detail as possible on the schedule of expenses. Don’t have a lot in “miscellaneous expense” or “office supplies.”
2. Report all of your income. Sounds simple- but many people miss a basic check you should do before you file. If you have 1099 income make sure your income reported on schedule C equals or exceeds the total of your 1099’s. The 1099’s are recorded on the IRS’ computer so it’s an automatic letter to you if your income is less than the total reported to the IRS on 1099’s.
3. If you have received income that really belongs to someone else- usually interest income- report the total amount per the 1099-INT and subtract the “nominee interest” that belongs to the other person. A lot of tax prep software has this feature and will do it for you.
4. Again- they’re looking at your deductions- check Schedule A- itemized deductions- review the standard percentages used by the IRS and make sure you don’t exceed them.
5. Office-In-The-Home- yes- the IRS has made a special form to “flag” the fact you are taking this deduction. But don’t let that stop you! If you have an office in the home you are entitled to this deduction. As long as the percentage of business use (computed by taking the square footage of your office divided by the square footage of the whole house or apartment) is a “reasonable” amount you won’t be audited. Make sure it’s a “reasonable” %- I wouldn’t go over 20 %.
6. Vehicle Expense- another flag- but complete the detailed schedule showing how you computed the deduction and make sure it’s attached to your return. If filing electronically find software that includes the detail.
7. Non-cash Charitable Contributions- IRS hot topic right now- gifts of used clothing and stuff to Goodwill- yes another form to flag it- but complete the form 8283 with name and address of charity, date of donation and estimated value. Put descriptions of items given- use the large items like sofa, desk, TV, video recorder, instead of “miscellaneous.” Enter the cost- we usually estimate this a three times the value.
These are just a few areas where you can avoid an audit by being careful with your presentation. If you have any questions about your deductions or presentation call Law Offices of Patricia Rowe at 925-256-1000.
Well, the truth is you can deduct whatever you want on your returns until you’re audited. Then you’re screwed!
Keep in mind, the federal statute of limitations is three years and states are three to four years. That means the IRS has three years to audit your return. They don’t even look at your return until two years after you’ve filed it. So, by the time they audit you, disallow your deductions, recalculate your tax and assess a deficiency it’s three years after you filed and you’ve got to pay interest and penalties in an amount almost as much as the additional tax.
It’s better to keep receipts and records and deduct only what you’ll be able to defend in an audit. Another bit of advice is watch how you report your income and deductions on your tax return:
1. It’s all in the presentation! Schedule C “Profit or Loss from Trade or Business” is the area that usually gets people audited. The IRS is looking at deductions. Give as much detail as possible on the schedule of expenses. Don’t have a lot in “miscellaneous expense” or “office supplies.”
2. Report all of your income. Sounds simple- but many people miss a basic check you should do before you file. If you have 1099 income make sure your income reported on schedule C equals or exceeds the total of your 1099’s. The 1099’s are recorded on the IRS’ computer so it’s an automatic letter to you if your income is less than the total reported to the IRS on 1099’s.
3. If you have received income that really belongs to someone else- usually interest income- report the total amount per the 1099-INT and subtract the “nominee interest” that belongs to the other person. A lot of tax prep software has this feature and will do it for you.
4. Again- they’re looking at your deductions- check Schedule A- itemized deductions- review the standard percentages used by the IRS and make sure you don’t exceed them.
5. Office-In-The-Home- yes- the IRS has made a special form to “flag” the fact you are taking this deduction. But don’t let that stop you! If you have an office in the home you are entitled to this deduction. As long as the percentage of business use (computed by taking the square footage of your office divided by the square footage of the whole house or apartment) is a “reasonable” amount you won’t be audited. Make sure it’s a “reasonable” %- I wouldn’t go over 20 %.
6. Vehicle Expense- another flag- but complete the detailed schedule showing how you computed the deduction and make sure it’s attached to your return. If filing electronically find software that includes the detail.
7. Non-cash Charitable Contributions- IRS hot topic right now- gifts of used clothing and stuff to Goodwill- yes another form to flag it- but complete the form 8283 with name and address of charity, date of donation and estimated value. Put descriptions of items given- use the large items like sofa, desk, TV, video recorder, instead of “miscellaneous.” Enter the cost- we usually estimate this a three times the value.
These are just a few areas where you can avoid an audit by being careful with your presentation. If you have any questions about your deductions or presentation call Law Offices of Patricia Rowe at 925-256-1000.
Tuesday, August 25, 2009
What Is Estate Planning?
Estate planning is the process of analyzing your family dynamics, your assets and liabilities, what you wish to happen after your death and creating documents to ensure Remember, you are planning for the next three years only. It’s too hard to plan for contingencies and possibilities much further out into the future than three years. Therefore, you should plan to review your estate planning documents every three years.
What Is A Trust?
A Trust is a way to ensure that your family is cared for if you die or become disabled. You transfer your money and property to a trust, designate trustees and specify the terms of the distribution of your property. The trustee then has fiduciary duties to preserve and safeguard the assets of the trust, ensure that they earn a sufficient rate of return and make distributions when and to whom you indicate in the trust.
One of the most important things is that under the law the money or property in the trust can only be used for the benefit of the beneficiaries.
How Does A Trust Work?
Create the Trust-
You create the trust by writing the trust document. You sign it, notarize it then you must fund it. That means you must transfer some money or property to the trust. This is a revocable grantor trust that becomes effective immediately. You are the trustor, settlor and grantor- person who creates the trust.
Revocable Trust:
· A revocable trust can be changed during your lifetime.
· You can change the beneficiaries
· You can put money and property into and take it out of the trust at any time (subject to community property rules)
· Community property remains community property- either spouse can take it out
· Separate property remains separate property- only the owner of the separate property can take it out
· You are the initial trustee and beneficiary of the trust (both spouses, if married)
· You can change the distributions rules
· The trust becomes irrevocable on your death (50% of it if a married couple)
Grantor Trust:
Creator of the trust retains incidents of ownership over assets, receives benefits of assets
· Creator handles all investment decisions, takes all income, can take property out & put property into the trust at will
· Creator reports all income and expenses on his or her income tax returns
· Trust uses creator’s social security number
Or you can put a provision in your will or your living trust to create the trust on your death. This is also an irrevocable trust that only comes into being when you die.
Name the Trustee-
If you are creating the trust and funding it now, you (both of you, for a married couple) can be the trustee and name someone as the alternate trustee to serve when you can no longer do it. It should be someone who can manage money and invest it properly.
The trustee will be responsible for:
· investing funds to get a good rate of return
· perhaps selling assets, especially real estate
· transferring money and assets
· ensuring the validity of and paying debts
· making sure all distributions are made on time
· responding to requests for additional distributions from beneficiaries
· completing all required accountings on a timely basis
· making sure all income tax returns are filed and taxes are paid timely
If you think about it, this is too much for many adult children to handle, especially if they are young adults eighteen to twenty five years old. The trustee does not have to be the same person as the executor of your will, but oftentimes is.
You should ask this person if they are willing to do it and ask him or her to sign the trust document accepting the job.
You should name as many alternate trustees as you can in case those persons named can no longer do it. If you don’t have any alternates you can appoint a bank, such as Wells Fargo, or a professional trustee. Remember, you are planning for the next three years only.
Give the Specifics of the Distributions to Beneficiaries-
What will your children need after you’re gone? Here’s a list of considerations for child beneficiaries:
· Are they minors who will need someone to care of them?
· How much will they need for their own support per month?
· How much income will your assets generate per month?
· Will they remain in your current residence or live some where else?
· Do they have private school tuition?
· Will they be attending college soon?
· Do they have any special medical or other needs?
· Are they mature enough to manage their own assets?
· Could they be a cotrustee?
· Are there any drug or alcohol abuse problems?
· Do they have good relations with their siblings?
This is not a complete list. You also want to consider if there are services, such as a nanny, that would have to be hired out when one spouse dies.
Describe How the Trustee Will Make Distributions-
You can give the trustee discretion to decide what the reasonable distributions to the beneficiaries are for the trust or you can give specific instructions and require the payment of a certain set monthly amount to be paid or require that all income be paid out to the beneficiaries each month. Likewise, for the principal of the trust you can decide whether the principal of the trust must be paid out to the beneficiaries at certain times or whether to leave it to the discretion of the trustee to decide. Oftentimes trust distributions are required to be made as follows:
One-third of trust principal is distributed when the children reach age 25
One-half of trust principal is distributed when the children reach age 30
The balance of trust principal is distributed when the children reach age 35
Morre to come in my next post! Please leave a comment and forward this to Twitter, Facebook, etc.
Estate planning is the process of analyzing your family dynamics, your assets and liabilities, what you wish to happen after your death and creating documents to ensure Remember, you are planning for the next three years only. It’s too hard to plan for contingencies and possibilities much further out into the future than three years. Therefore, you should plan to review your estate planning documents every three years.
What Is A Trust?
A Trust is a way to ensure that your family is cared for if you die or become disabled. You transfer your money and property to a trust, designate trustees and specify the terms of the distribution of your property. The trustee then has fiduciary duties to preserve and safeguard the assets of the trust, ensure that they earn a sufficient rate of return and make distributions when and to whom you indicate in the trust.
One of the most important things is that under the law the money or property in the trust can only be used for the benefit of the beneficiaries.
How Does A Trust Work?
Create the Trust-
You create the trust by writing the trust document. You sign it, notarize it then you must fund it. That means you must transfer some money or property to the trust. This is a revocable grantor trust that becomes effective immediately. You are the trustor, settlor and grantor- person who creates the trust.
Revocable Trust:
· A revocable trust can be changed during your lifetime.
· You can change the beneficiaries
· You can put money and property into and take it out of the trust at any time (subject to community property rules)
· Community property remains community property- either spouse can take it out
· Separate property remains separate property- only the owner of the separate property can take it out
· You are the initial trustee and beneficiary of the trust (both spouses, if married)
· You can change the distributions rules
· The trust becomes irrevocable on your death (50% of it if a married couple)
Grantor Trust:
Creator of the trust retains incidents of ownership over assets, receives benefits of assets
· Creator handles all investment decisions, takes all income, can take property out & put property into the trust at will
· Creator reports all income and expenses on his or her income tax returns
· Trust uses creator’s social security number
Or you can put a provision in your will or your living trust to create the trust on your death. This is also an irrevocable trust that only comes into being when you die.
Name the Trustee-
If you are creating the trust and funding it now, you (both of you, for a married couple) can be the trustee and name someone as the alternate trustee to serve when you can no longer do it. It should be someone who can manage money and invest it properly.
The trustee will be responsible for:
· investing funds to get a good rate of return
· perhaps selling assets, especially real estate
· transferring money and assets
· ensuring the validity of and paying debts
· making sure all distributions are made on time
· responding to requests for additional distributions from beneficiaries
· completing all required accountings on a timely basis
· making sure all income tax returns are filed and taxes are paid timely
If you think about it, this is too much for many adult children to handle, especially if they are young adults eighteen to twenty five years old. The trustee does not have to be the same person as the executor of your will, but oftentimes is.
You should ask this person if they are willing to do it and ask him or her to sign the trust document accepting the job.
You should name as many alternate trustees as you can in case those persons named can no longer do it. If you don’t have any alternates you can appoint a bank, such as Wells Fargo, or a professional trustee. Remember, you are planning for the next three years only.
Give the Specifics of the Distributions to Beneficiaries-
What will your children need after you’re gone? Here’s a list of considerations for child beneficiaries:
· Are they minors who will need someone to care of them?
· How much will they need for their own support per month?
· How much income will your assets generate per month?
· Will they remain in your current residence or live some where else?
· Do they have private school tuition?
· Will they be attending college soon?
· Do they have any special medical or other needs?
· Are they mature enough to manage their own assets?
· Could they be a cotrustee?
· Are there any drug or alcohol abuse problems?
· Do they have good relations with their siblings?
This is not a complete list. You also want to consider if there are services, such as a nanny, that would have to be hired out when one spouse dies.
Describe How the Trustee Will Make Distributions-
You can give the trustee discretion to decide what the reasonable distributions to the beneficiaries are for the trust or you can give specific instructions and require the payment of a certain set monthly amount to be paid or require that all income be paid out to the beneficiaries each month. Likewise, for the principal of the trust you can decide whether the principal of the trust must be paid out to the beneficiaries at certain times or whether to leave it to the discretion of the trustee to decide. Oftentimes trust distributions are required to be made as follows:
One-third of trust principal is distributed when the children reach age 25
One-half of trust principal is distributed when the children reach age 30
The balance of trust principal is distributed when the children reach age 35
Morre to come in my next post! Please leave a comment and forward this to Twitter, Facebook, etc.
Monday, August 17, 2009
White House Email on Health Care Reform
Today I received the White House email forwarded to me by my Uncle George. Yes, the one the White House is sending out to convince people that we want Obama’s health care reforms. I don't believe a lot of this propaganda that the White House is sending out about the health care reforms. These things they are discussing in their email may be in the bill - however- they don't discuss the other things that are in there, such as the public option- that include fines for employers who don't provide health care insurance for their employees.
Employers don't provide health care insurance for their employees because they can't afford it! I know as a small business woman. So if you are forced to provide health insurance or pay extra taxes, employers will of course choose the cheaper public option to provide the government plan to their employees. That's how Obama and the Dems intend to get us all eventually onto the government plan so we can have Socialized Medicine.
You must realize that this will lead to a huge government bureaucracy that will develop to implement and grow the government plan. Let's all think about a government agency like the DMV running our medical care system. That's appealing.
Just look at Medicare. The bureaucracy that runs the Medicare system is fraught with fraud they cannot control, whereby the government pays out millions in false claims. The people who really need Medicare are so overwhelmed with paperwork I have personally met people who have had to hire an outside company just to process their Medicare claims & do their paperwork. There are also many situations where coverage is denied and patients have to hire an attorney to force Medicare to pay for their treatment.
Why on earth would anyone want to create a bigger more inefficient government agency to run a health care system that would be a bigger more complicated version of Medicare? Another mismanaged federal government agency that is also running out of money?
And that doesn't address the lies the White House & Obama are telling about this plan not costing the government any more money & not increasing the deficit. That's an out and out lie. Obama's own Government Accounting Office has said so. There's no way he can pay for this without raising taxes. Oh yes, I forgot, the employers are going to pay for it. Is that before or after they go out of business? You can't get blood from a turnip.
There are other reforms that could be done, such as, allowing insurance companies to sell insurance across state lines. That would engender competition and by the workings of a free market would lower prices. That's what this country is based on- free enterprise. That's why this country is the greatest country on earth and why we have become so prosperous.
Obama is a Socialist who believes in a redistribution of the wealth. He has said so many times. This is an obvious first step to making our country into a Socialist society like those in Europe. That's why people are so outraged about this health care plan. Perhaps alot of people who elected Obama want that. But many people don't.
You know this is Obama’s first step towards that goal of redistributing the wealth. That’s another goal of his he has stated many times. We all know “redistributing the wealth” means some people work hard and make money, then the government takes it and gives it to people who don’t work.
All you have to do is look at California to see what will happen to the country if these health care reforms are forced on us. It will go bankrupt in the face of the Democrats' feeble thinly veiled attempt to get the poor to reelect them. But there just aren't enough taxpayers to support all those people who are using our government resources such as, free health care. Again, just look at California. That’s what will happen to our country if this government health care system is put in place.
How can you think that Obama & the Democrats don't intend to make this into government run health care system? That's what he said he wanted to do in his campaign! That's what many in Congress have said they wanted for years. So to say that's not their intention is just another lie.
Employers don't provide health care insurance for their employees because they can't afford it! I know as a small business woman. So if you are forced to provide health insurance or pay extra taxes, employers will of course choose the cheaper public option to provide the government plan to their employees. That's how Obama and the Dems intend to get us all eventually onto the government plan so we can have Socialized Medicine.
You must realize that this will lead to a huge government bureaucracy that will develop to implement and grow the government plan. Let's all think about a government agency like the DMV running our medical care system. That's appealing.
Just look at Medicare. The bureaucracy that runs the Medicare system is fraught with fraud they cannot control, whereby the government pays out millions in false claims. The people who really need Medicare are so overwhelmed with paperwork I have personally met people who have had to hire an outside company just to process their Medicare claims & do their paperwork. There are also many situations where coverage is denied and patients have to hire an attorney to force Medicare to pay for their treatment.
Why on earth would anyone want to create a bigger more inefficient government agency to run a health care system that would be a bigger more complicated version of Medicare? Another mismanaged federal government agency that is also running out of money?
And that doesn't address the lies the White House & Obama are telling about this plan not costing the government any more money & not increasing the deficit. That's an out and out lie. Obama's own Government Accounting Office has said so. There's no way he can pay for this without raising taxes. Oh yes, I forgot, the employers are going to pay for it. Is that before or after they go out of business? You can't get blood from a turnip.
There are other reforms that could be done, such as, allowing insurance companies to sell insurance across state lines. That would engender competition and by the workings of a free market would lower prices. That's what this country is based on- free enterprise. That's why this country is the greatest country on earth and why we have become so prosperous.
Obama is a Socialist who believes in a redistribution of the wealth. He has said so many times. This is an obvious first step to making our country into a Socialist society like those in Europe. That's why people are so outraged about this health care plan. Perhaps alot of people who elected Obama want that. But many people don't.
You know this is Obama’s first step towards that goal of redistributing the wealth. That’s another goal of his he has stated many times. We all know “redistributing the wealth” means some people work hard and make money, then the government takes it and gives it to people who don’t work.
All you have to do is look at California to see what will happen to the country if these health care reforms are forced on us. It will go bankrupt in the face of the Democrats' feeble thinly veiled attempt to get the poor to reelect them. But there just aren't enough taxpayers to support all those people who are using our government resources such as, free health care. Again, just look at California. That’s what will happen to our country if this government health care system is put in place.
How can you think that Obama & the Democrats don't intend to make this into government run health care system? That's what he said he wanted to do in his campaign! That's what many in Congress have said they wanted for years. So to say that's not their intention is just another lie.
Wednesday, August 5, 2009
Cash For Clunkers
We went last night to talk to salesman at Chrysler dealership to find out about the "Cash for Clunkers" program. We went to Chrysler because we heard they giving matching funds in the amount of $ 4,500, so we wanted to find out how to get $ 9,000 towards a new car since we have no money.
The answer is- you can't. Only people who already have money to buy a new car can use the program.
The rules are:
1. The "clunker" must have been registered to you for the last 2 years. It must belong to you. We had a clunker owned by my daughter's in-laws- so my daughter and her husband couldn't use that car to get the $ 4,500.
2. You must have had insurance on the clunker for the past year. Ok- we insure all of our cars whenever we have the money. So our clunkers would have qualified under that rule.
3. You must "own" your car- so if it has a loan on it- the lender owns it and you don't and it doesn't qualify. So my clunker didn't qualify.
4. The Chrysler $ 4,500 only applies if you buy a PT Cruiser. That's not what we were interested in- so it wouldn't have helped us.
5. You only get $ 4,500 from the government if it's a truck you are giving in as a clunker. Cars only get $ 3,500.
So again- we have a program that only helps people who already have enough money to have no car loan, have their insurance paid up to date on a clunker they don't usually drive to help them buy another brand new car that they have enough cash to be able to put an additional 10 to 20 grand down payment on!
Another great government program! Thanks for the help!
The answer is- you can't. Only people who already have money to buy a new car can use the program.
The rules are:
1. The "clunker" must have been registered to you for the last 2 years. It must belong to you. We had a clunker owned by my daughter's in-laws- so my daughter and her husband couldn't use that car to get the $ 4,500.
2. You must have had insurance on the clunker for the past year. Ok- we insure all of our cars whenever we have the money. So our clunkers would have qualified under that rule.
3. You must "own" your car- so if it has a loan on it- the lender owns it and you don't and it doesn't qualify. So my clunker didn't qualify.
4. The Chrysler $ 4,500 only applies if you buy a PT Cruiser. That's not what we were interested in- so it wouldn't have helped us.
5. You only get $ 4,500 from the government if it's a truck you are giving in as a clunker. Cars only get $ 3,500.
So again- we have a program that only helps people who already have enough money to have no car loan, have their insurance paid up to date on a clunker they don't usually drive to help them buy another brand new car that they have enough cash to be able to put an additional 10 to 20 grand down payment on!
Another great government program! Thanks for the help!
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